 Illinois lawmakers have put forth new proposals to continue the state’s
corporate tax credit program, which is set to expire in April. Politicians have
proposed extending these corporate tax credits despite Illinois’ nearly $13
billion in unpaid bills, $130 billion pension crisis, $8 billion in deficit
spending, and recently issued calls by politicians for nearly $7 billion in tax
hikes.
But the Economic Development for a Growing Economy, or EDGE, tax credit program
has not only allowed the government to give away tax credits and pick winners
and losers among businesses, but also has failed to deliver on its promises of
long-term economic development. Supporters of EDGE have claimed the program has
created 34,000 jobs since 2001, though Illinois is down a net of 40,000 jobs
since then.
The proposals
State Rep. Michael Zalewski, D-Riverside, sponsored House Bill 2744, a plan to
revamp and expand the EDGE tax credit program. The plan has the support of the
Illinois Chamber of Commerce.
The proposal effectively rebrands the EDGE program under the Business and
Employment Development Tax Credit Act. The measure would cap total credits at
$50 million annually and set a five-year duration for each credit. Under the
revised program, the credits would be calculated as 10 percent of the wages paid
to new or retained full-time employees and 5 percent of the wages paid to new or
retained part-time employees, essentially requiring taxpayers to pick up a
portion of a recipient company’s payroll. Companies could receive additional
amounts for hiring in areas with high poverty levels or for paying new or
retained full-time employees wages that exceed 150 percent of the state’s
minimum wage.
It should be noted that the proposal would also allow taxpayer money to be
awarded to companies for retaining workers, as opposed to the current law, which
requires EDGE tax credits to be used to hire new workers. The Liberty Justice
Center filed suit against the Illinois Department of Commerce and Economic
Opportunity, or DCEO, alleging that the DCEO was breaking the law by giving EDGE
credits to companies for simply retaining workers. Upon HB 2744’s passage, it
would be legal for the state to offer tax credits to companies that merely keep
jobs in Illinois. The program has no sunset date and would be permanent if it
becomes law.
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State Sen. Pam Althoff, R-McHenry, introduced another plan to keep
the corporate tax credits flowing. Senate Bill 2071 would create the
Transforming, Helping, and Reviving Illinois’ Versatile Economy
(THRIVE) Job Creation Tax Credit Act.
The THRIVE Act would only allow credits to be applied to new hires
and collected over 10 years, or 15 years if the company locates its
project in a poor area or one with high unemployment.
Under SB 2071, the new hires don’t even have to be from Illinois.
Section 25 of the bill, which concerns relocations within Illinois,
specifically mentions companies moving in from out of state.
According to this provision, “any full-time employee of an eligible
business relocated to Illinois in connection with that qualifying
project is deemed to be a new employee for purposes of this Act.”
Lawmakers should let EDGE expire
The EDGE program, which has granted $1.3 billion worth of tax
credits to handpicked companies since 2001, expired on Dec. 31,
2016. However, the General Assembly passed, and Gov. Bruce Rauner
signed, a law extending EDGE through April 30, 2017.
While lawmakers negotiate how much taxpayer money to give away to
the politically connected, Illinoisans continue to suffer in a state
with skyrocketing debts and deficits. Rather than shifting more of
the tax burden onto Illinois’ families, who already have the
heaviest tax burden in the nation, lawmakers in Springfield should
consider crafting policies that attract companies to the state,
instead of bribing them.
Politicians should let the failed EDGE program expire.
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